BSkyB to buy Amstrad for £125m

The UK company that once had a 25 percent share of the European IT market now finds itself part of Rupert Murdoch's empire

Broadcaster BSkyB is buying Amstrad, the venerable computing name that once made up to a quarter of the European PC business — but the deal is all about set-top boxes, including the popular Sky+ digital video recorder.

Amstrad chairman Sir Alan Sugar won't be fired, but will run the business for his new boss, BSkyB chief James Murdoch. Sugar still owns 27.9 percent of the company he founded in 1968, and will get £35m if the deal goes through. 

BSkyB's offer price of 150 pence per share is 23 percent more than the Amstrad shares were fetching on the open market. Amstrad shares were trading at £2 each in March, but have been falling since then, and shareholders aren't going to get a better deal, according to analysts.

The name Amstrad still resonates within the history of the UK computer industry — the company made its own CPC home PCs, followed by the PCW range of word processor PCs and its own range of DOS/Windows machines, which took off successfully from 1986.

Now, however, the PC business has been hived off to Viglen, and the vast bulk (75 percent) of Amstrad revenue comes from selling Sky set-top boxes, including Sky+ digital video recorder boxes, now in use in around two million UK households. The BSkyB partnership dates back to the launch of Sky in 1989, when Amstrad made all the set-top boxes and satellite dishes. Amstrad currently makes only 30 percent of Sky's boxes, the rest being made by Pace Micro and Thomson.

The deal will give BSkyB an in-house set-top box design team, which it says could lead to new boxes and new services getting delivered more quickly to users — something that will be important as the possibilities for home services expand to include femtocells, broadband and other options.

The move threatens the position of Thomson and Pace. Pace shares fell 8.75 pence on the announcement, but the company was unable to provide a comment on the Amstrad takeover before publication.

In 1986 Amstrad bought the assets of Sinclair Research, cornering the market for nostalgic UK PC brands. Its only recent forays into the IT field have been the e-m@iler and its successor, the E3 videophone, both of which failed and were closed down, despite a continued support role within the TV series fronted by Sugar, The Apprentice.

"Sky is a great British success story," said Sugar in a statement. "I'm proud to have worked so closely with it, and I look forward to continuing to play a part in this exciting business."

After 40 years of existence and 20 years since its domination of the market for European PCs, the only other product on the Amstrad homepage is Integra Face Care System, an anti-ageing system involving creams.